Bega ups offer for Warrnambool Cheese and Butter

Bega Cheese is the latest dairy processor to increase its bid for Warrnambool Cheese and Butter.

This morning it announced it was raising its offer for WCB from 1.2 to 1.5 Bega shares plus $2 cash.

That would take Bega’s bid to $8.87 based on current prices, set against a $9 a share offer yesterday from Australia’s biggest milk processor, Murray Goulburn.

Canadian rival Saputo’s current offer sits at $8 per share and was previously endorsed by the board of WCB.

The companies are in a three-way tussle to secure WCB, with all banking on increasing Asian demand for dairy products.

The WCB board has now urged shareholders to wait while it assesses Murray Goulburn’s fresh bid.

While Saputo has been cleared by the competition regulator, the ACCC, and the Federal Treasurer Joe Hockey, Murray Goulburn's offer is yet to get the go-ahead.

That could take up to three months.

Saputo needs to secure 50.1 per cent of shares, a challenge that is also considerable, given its rivals in MG, Kirin and Bega own 45 per cent.

Analyst Steve Spencer, from Fresh Agenda, says as Bega shares increase in value, so too does its bid.

“The local players have to get in quickly to keep the game alive. Whilst right now the Bega offer doesn’t appear to be the offer, which is all cash, as we’ve seen in the past the Bega share price has increased over time making their offer stronger and it’s already risen.”

In a statement, head of Bega Cheese Barry Irvin talked up the bid to WCB shareholders.

"If you accept, you will be paid your offer consideration of Bega Cheese shares and cash within eight business days after your valid acceptance form is processed,’’ he said.

Mr Irvin said a Bega/WCB merger would carry less debt than an MG/WCB merger.

‘‘Upon a successful merger, Bega Cheese will maintain healthy gearing of approximately 32 per cent.’’

Murray Goulburn managing director Gary Helou said his company's gearing would be 56.7 per cent if its bid was successful, but said he was comfortable with that level of debt, given the company was expanding.